Glenn Stearns' Many Adversities Became the Keys to His Mega-Success

By Scott S. Smith | Tuesday, 09 April 2024 | Feature

Glenn Stearns has had a roller-coaster career in the mortgage lending industry that forced him to become a major innovator to survive and thrive.

If you have ever actually started a company, you know it seems to be a law of the entrepreneurial universe that you quickly realize that many of your carefully laid plans have to be abandoned in the face of unexpected realities. You may feel that you've been plagued by an unfair amount of bad luck, questionable practices by established competitors, and technical challenges none of your team foresaw.

If so, you need to read Glenn Stearns' “INTEGRITY: My Slow and Painful Journey to Success” (the cover of the book, co-authored with Laura Morton, has the title in white, except for the "grit" in "integrity," which is red, because that is central to his story). 

You will realize that your own travails have been relatively modest compared with what he has been through, which will put whatever happens next to your business in perspective. The other reason to read this is to be inspired by the fact that he managed to not only overcome most of these enormous challenges, he says they forced him to think differently and that led to even greater success.

"My superpower has always been overcoming adversity," he told Startup Savant. "I'm a world-class compartmentalizer and no matter how bad things get, I never make room for negativity. I enjoy figuring out solutions to the puzzle when I face challenges and then finding a way forward, which is something every entrepreneur can do." 

He is now the CEO of Kind Lending, which aims to apply "servant leadership" to mortgage lending for the benefit of customers, employees, and others in the industry. 

Lessons On the Way to His First Startup

Stearns was born dyslexic in 1963 in Silver Spring, Maryland, which made it very difficult for him to read, so he failed fourth grade after his family had moved to Rockville.

His parents were alcoholics and he began drinking early and later drove under the influence at high speeds, resulting in his license being suspended multiple times. Alcohol and drugs also triggered anger about his frustrations and he got into lots of fights.  

At 14, he had his first child, a daughter, but could only provide minimal support from his part-time jobs, while the mother lived with her parents. 

But in high school and college he held a variety of sales jobs, which helped him to graduate from Towson College with a B.A. in economics in 1987, the first in his family to earn a degree.

"I'm not a great reader today, but my dyslexia helped me learn how to communicate and think in other ways," he said. "My brain makes it possible for me to easily connect with people, so I consider dyslexia a gift."

He had no idea how to use his degree, but thought there would be more opportunities in Los Angeles. He saw an ad for a job as a loan officer at a small mortgage company and applied for the position, even though he knew nothing about the industry. Compensation was based entirely on a commission for selling a loan, so he began meeting realtors at open houses and one of them asked him to distribute fliers about his open houses, on which Stearns could put his contact number for a loan. 

"Seven months and 20 loans later I still didn't really know what I was doing," he recalled. "A lot of getting a loan approved is how you present it, so one night I broke into the company's files to see how others did it, strengthening the weak points and highlighting the strong ones."

He put fliers on car windows, met builders who were selling small developments, and did a lot of legwork for realtors. One of them, Ron, suggested they open a mortgage business together, even though neither of them knew anything about it, and they started First Pacific Financial (FPF). Stearns' employer was so upset by the competition that he withheld $15,000 in commissions and lied to the labor board, so he was never paid.

Expanding the Pie, While Others Eat It

Once Stearns started as a broker in mortgage lending, business was slow, but he realized there was great potential in offering services beyond lending, such as credit, appraisal, and escrow (a neutral account that protects the down payment of the buyer and the homeowner's estimated property taxes and insurance, paying them when due until the sale closes, if it does). 

He and Ron sold FPF to concentrate on Carriage Escrow in 1993, then Carriage Abstract (for escrow in states outside California in 1999, where it is known as abstract or title insurance). These struggled until a receptionist at a local office, the U.S. Department of Housing and Urban Development (HUD) , explained how to get a line of credit as a funding source and how to bid on a HUD contract. Most bids came over fax, but he felt he would have a better chance if he flew to the Denver office to hand his to the officer and he started getting hundreds of deals a month.

The problem was that he was losing $150 on each one because he had not understood the costs per transaction. But each involved $5,000 paid to lawyers to handle the high rate of condominium foreclosures in California, plus the Homeowners Association fees for the one-and-a-half years it took to go through the process. 

He proposed that HUD pay him an extra $300 each and he would guarantee to negotiate the legal fee down by at least half. He was soon doing HUD business all over the country and the government saved a fortune. Stearns bought out Ron from the escrow company for $250,000 and he eventually sold 49% of it to FPF for $15 million. 

But in 1999, he received a call from HUD to take over the contracts in Maryland, where he grew up, which presented a dilemma. He was given a deadline to do this in two weeks, but did not have nearly enough employees to tackle the tsunami of properties ready to close. 

"These were the moments I lived for–rising to meet a challenge that would crush the competition," he wrote. "Even though we didn't officially have a contract with HUD, we immediately started working as if we did." 

He expected to deal with 150 contracts a month, but during the first month HUD gave him 500. He also wasn't familiar with the state's title law, which required a complicated process dependent on access to court files and certified document signers, of which there were few. These were 60-day titles, which meant people expected to move into their homes then. 

HUD kept dumping 500 a month on him and four months into this, hundreds of people were living out of their cars or hotels and employees quit under the strain. Some realtor friends and HUD employees from Philadelphia stepped in to help manage the chaos.

Just as he finally got things turned around, a new Secretary of Housing and Urban Development took over and declared HUD would only be working with small escrow companies. Stearns lending was now huge so he was out of the government-managed business. His mortgage lending company, FPF, was in debt.

Running Into the Fire

Stearns was proud of having grown FPF for 25 years by reinvesting the bulk of the profits, which eventually earned it a credit line of $2.5 billion. In 2004, he changed the name to Stearns Lending and wanted to grow from being just a mortgage broker to becoming a mortgage banker.

But in 2007, the bottom fell out of the market because the federal policies of Fannie Mae and Freddie Mac pressured the banking industry to hand out a high percentage of risky subprime mortgages (for which banks charged high fees). These were repackaged as collateral for mortgage-based securities that foreign banks bought and a new global Great Depression was sparked.

By September 2007, Stearns Lending had lost 85% of its revenue and banks wanted it to buy back $100 million in loans that had gone bad. The California Department of Corporations insisted it also calculate the past five years of loans and refund the prepaid interest if the loan had not been fulfilled within 24 hours. He did not have the money, staff, or time to do this and had a feeling of impending doom that did now allow him to sleep one night. 

He began thinking about how Viktor Frankl, author of “Man's Search for Meaning,” had survived the Holocaust by believing there was divine purpose in his circumstances, but without putting a deadline on when to expect understanding why.

"You may have unrealistic expectations for a timeline when so much is out of your control and when that fails, you lose hope," Stearns said. "The mindset can be the difference between life and death. I started thinking 'I'll get through this' for the next few hours and when the sun shone on my face I found myself saying out loud, 'Be still and know that I am God.'"

His startled wife sat up and said, "I was just going to tell you those exact same words." They found the verse in the Bible's Psalms 46:10. "I could no longer attach my success or failure to losing my business," he wrote. "I saw the troubles I had when I was young were good preparation for what I was going through now and knew one should never lose hope."

He wrote down each person or institution he owed money to, then carefully reread his contracts. He realized he did not owe the banks anything because each loan was based on "stated income," and they had not insisted on proof, even though they set the parameters and were allowing fraud. He visited each one and gave them two options: he would eventually pay five cents on the dollar or they were on their own. All agreed to work with him. 

Then he approached the state Department of Corporations and pointed out he had paid off each loan to the title companies immediately, so they were responsible for paying any interest beyond 24 hours. But many of these were small and the fees were as small as $42 and it made no sense to pursue them with legal action. He was eventually fined $382 by the state for just four loans and made sure from then on that title companies did their job on time.

Meantime, he went to a competitor who was letting everyone go and selling the desks and chairs. Stearns said he believed loan trends would improve and offered to buy the furniture and hire the workforce, most of whom had been his employees before. They would now help him jump back into underwriting FHA (Federal Housing Administration) and Veterans Administration (VA) loans.

"I rolled the dice on the biggest gamble of my career," he wrote. "It was an all-or-nothing situation. But I knew it was the perfect opportunity to get the very best people working for me."

Then just as things seemed to improve in 2008, a New York banker decided he was pulling all but two of its 93 loans and getting out of the business in a week. Stearns flew all night to get in front of him and make a personal connection that ended with his company and Quicken being the two which survived. 

Kindness in Lending

By 2011, Stearns Lending had opened 100 offices. He decided after 15 years it was time to sell a controlling stake and was paid billions for 70% of his company by the Blackstone Group hedge fund, which had a great track record managing its acquisitions.

Over the next five years Stearns sailed the world with members of his family, spent time at their home in Fiji, produced the Discovery TV series "Undercover Billionaire," and was treated for cancer twice. He also was inducted into the Horatio Alger Association of Distinguished Americans, whose members are entrepreneurs who bootstrapped their way to success despite great challenges.

Meantime, however, Blackstone had mismanaged his company, despite his feedback on missteps in their operations, and drove it into bankruptcy, which wiped off tens of millions they owed him and left him with a tax liability of well over $100 million. Ironically, Blackstone sold the company in 2021 for a nice profit.

Stearns' response was not to go into a depression about more bad luck, but to see an opportunity to create a new kind of mortgage lending firm, Kind Lending. His investors were some of the people he had built strong relationships with all during his career. 

"Real success is not all the money and stuff you have, but your relationships, being fulfilled, choosing to be happy, and the legacy you leave," he said.

When the pandemic hit, many companies went out of business, so the Federal Reserve pumped massive stimulus into the economy by lowering the rate it charged banks by a record discount of 2%. This made every home that could be refinanced available, sparking an unprecedented boom.

But this also created a massive crisis because mortgage lenders began running out of credit lines and were taking up to 30 days to fund. Because Kind Lending was so new it was not overwhelmed and could underwrite them in two days. "We funded a billion dollars in just five months and no lender had ever climbed that far so fast," he wrote. 

But by May 2021, competitors were able to process loans just as quickly and everyone was lowering their rates. They were losing money on each one, but they had made enough profits to ride out the losses. Stearns' key people left for bigger opportunities until the industry collapsed from the losses and some of his workers came back.

Stearns' career should be an inspiration to every entrepreneur on a roller coaster ride.

About the Author

Scott S. Smith

Scott S. Smith has had over 2,000 articles and interviews published in nearly 200 media, including Los Angeles Magazine, American Airlines’ American Way, and Investor’s Business Daily. His interview subjects have included Bill Gates, Richard Branson, Meg Whitman, Reed Hastings, Howard Schultz, Larry Ellison, Kathy Ireland, and Quincy Jones.